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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 30.00 | ACUITE A | Stable | Assigned | - |
| Bank Loan Ratings | 114.50 | ACUITE A | Stable | Reaffirmed | - |
| Bank Loan Ratings | 235.00 | - | ACUITE A1 | Assigned |
| Bank Loan Ratings | 615.50 | - | ACUITE A1 | Reaffirmed |
| Total Outstanding | 995.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed the long-term rating of ‘ACUITÉ A’ (read as ACUITE A) and short-term rating of ‘ACUITÉ A1’ (read as ACUITE A one) on the Rs 730.00 Cr. bank facilities of R K D Construction Private Limited (RKD). Acuite has also assigned its long-term rating ‘ACUITÉ A’ (read as ACUITE A) and short-term rating of ‘ACUITÉ A1’ (read as ACUITE A one) on the Rs 265.00 Cr. bank facilities of R K D Construction Private Limited. The outlook remains ‘Stable’.
Rationale for reaffirmation and assignment The rating continues to reflect RKD’s healthy business profile supported by its strong project execution capabilities and long track record of work execution in the road and highway sector. The rating also factors in the growth recorded in the operating revenues along with stable operating profitability margins. The company recorded revenue of Rs.746.88 Cr in FY2023 against Rs.627.17 Cr in FY2022. Further, the revenue is estimated to be at around Rs.810.00 Cr in FY2024. The rating also takes comfort from the strong outstanding order book position of Rs.2978.48 Cr as of February 2024, executable in the next 24-30 months, reflecting healthy revenue visibility over the medium term. Furthermore, the financial risk profile continues to remain healthy marked by a conservative capital structure and comfortable coverage ratios. The working capital operations of the company remain moderately intensive with GCA days of 104 days in FY2023 against 100 days in FY2022 with moderate reliance on fund-based working capital limits. These rating strengths are partially offset by RKD’s high exposure to the road sector and the intensity of competition in construction business. |
| About the Company |
| RKD Construction Private Limited was started as a proprietorship firm in 1980 by Late Rohit Kumar Das and was engaged in civil construction activities for road and national highway projects. The constitution was changed to a closely held company in 1996. Currently, the company is managed by Mr Rohan Das. The company has executed projects primarily in the state of Odisha. |
| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has taken a standalone view of the business and financial risk profile of RKD to arrive at the rating. |
| Key Rating Drivers |
| Strengths |
| Long operational track record
RKD was founded by Late Rohit Kumar Das in 1996. Presently the company is managed by second generation promoters. Current management has more than two decades of experience in construction business. Over the years, the company has developed expertise in road and highway construction through successful completion of large projects in Odisha. Healthy scale of operations coupled with strong order book. The revenue of the company grew by ~19% in FY2023 to Rs.746.88 Cr from Rs.627.17 Cr in FY2022. Further, the company has achieved a revenue of Rs.573.82 Cr in 9MFY2024 and is estimated to achieve revenue of ~Rs.810.00 Cr in FY2024. The growth in revenue is supported by a strong order book position of Rs.2978.48 Cr as of February 2024, executable in next 24-30 months, reflecting healthy revenue visibility over the medium term. The duration of the contract depends on the size and nature of work to be done. The operating profit margin of the company remained stable at 13.20 % in FY2023 against 13.37 % in FY2022. It is further estimated to remain in the similar range over the medium term. Healthy financial risk profile The financial risk profile of the company is healthy marked by healthy net worth, low gearing and moderately comfortable debt protection metrics. The net worth of the company stood at Rs.286.99 Cr as on March 31, 2023 as compared to Rs.239.04 Cr as on March 31, 2022. The total debt of the company increased to Rs.221.39 Cr as of March 31, 2023 against Rs.160.23 Cr as of March 31, 2022. The increase in debt is primarily on account of increase in long term borrowings taken for the capex involving, procurement of new equipment’s, adding more vehicles and replacing redundant assets. The gearing of the company stood low at 0.77 times as on March 31, 2023 as compared to 0.67 times as on March 31, 2022. TOL/TNW stood moderate at 1.44 times as on March 31, 2023 as against 1.34 times as on March 31, 2022. The moderately comfortable debt protection metrics of the company is marked by Interest coverage ratio (ICR) of 3.97 times in FY2023 and debt service coverage ratio (DSCR) of 1.81 times in FY2023. The net cash accruals against total debt (NCA/TD) stood low at 0.30 times as on March 31, 2023 against 0.29 in the previous year. Acuité believes that the financial risk profile of the company will remain healthy over the medium term in absence of any large debt led capex plan. |
| Weaknesses |
| Tender based nature of operations and competitive industry
The company majorly executes government road construction/widening projects. The revenue of the company is highly dependent on the number and value of tenders floated by the Government. Since the nature of operations is tender based, the business depends on the ability to bid for contracts successfully. However, the company has a healthy outstanding order book position on the back of which this risk is reduced upto certain extent. Acuite believes that the ability of the firm to maintain the scale of operations along with profitability would be the key rating sensitivity factor over the medium term. |
| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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The company has adequate liquidity profile as reflected from its net cash accrual of Rs. 65.42 Cr in FY2023 as against current maturity of Rs. 22.66 Cr. Further, the company is expected to generate cash accruals in the range of Rs.71.89 Cr to 83.83 Cr during FY2024 & FY2025 against repayment obligation of Rs.29.66-25.00 Cr during the same period. The fund-based bank limit utilization of 12 months ended January 2024 stood at around 80 per cent. The current ratio stood moderate at 1.38 times in FY2023. However, the moderate working capital management of the company is marked by Gross Current Assets (GCA) of 100 days as on 31st March 2022 as compared to 131 days as on 31st March 2021. Acuite expects the liquidity position of the company to remain adequate over the medium term backed by steady accruals.
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| Outlook: Stable |
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Acuité believes the outlook on RKD will remain ‘Stable’ over the medium term backed by its long track record of operations, strong order book position and comfortable financial risk profile. The outlook may be revised to ‘Positive’ if the company is able to ramp up its scale of operation with substantial improvement in financial risk profile. Conversely, the outlook may be revised to ‘Negative’ in case of substantial deterioration in liquidity or financial risk profile due to increase in working capital requirement.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 746.88 | 627.17 |
| PAT | Rs. Cr. | 47.95 | 32.33 |
| PAT Margin | (%) | 6.42 | 5.15 |
| Total Debt/Tangible Net Worth | Times | 0.77 | 0.67 |
| PBDIT/Interest | Times | 3.97 | 3.60 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Infrastructure Sector: https://www.acuite.in/view-rating-criteria-51.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm |
| Note on complexity levels of the rated instrument |
| In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in. |
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